Report
Dave Nicoski ...
  • Ross LaDuke
EUR 235.08 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Small-Caps Closing the Gap

Major averages in the US (S&P 500, Dow, Russell 2000) and Europe (STOXX 600 & 50) each had throwbacks to their prior breakout levels last week, with all making successful tests of support amid reports of a potential setback in trade negotiations... see charts below. Thus far, buy-the-dippers have been rewarded. While a retest of these lows is possible -- particularly if something goes awry regarding US-China trade or the Fed -- we continue to believe dips should be bought as the weight of the evidence continues to point to a new leg higher for the broad equity market.

• Sector Relative Strength Rankings (RSR) & Weighting Recommendations. Five of the top seven Sectors in terms of RSRs are of the equal-weighted variety, further evidence that small-caps are closing the gap relative to large-caps... see pages 2-3.

• Small-Caps. The Russell 2000 index continues to show signs of breaking topside resistance, and made a successful test of support in the 1,600-1,605 range that we highlighted last week. Additionally, the bullish RS reversal is undeniable and the Russell 2000 is at multi-month highs relative to the S&P 500 and Russell 1000. At this point in time we are market-cap neutral... see page 4.

• Commodities. Risk-on commodities such as crude oil, copper, and lumber are all attempting to bottom to varying degrees -- something that would be consistent with a troughing global economy. Further evidence that the commodity structure is moving in favor of risk is the developing bottom in the copper vs. gold ratio... see pages 5-6.

• US Dollar (DXY) and EM Equities. The DXY is testing key support in the $97.10-$97.36 range. The combination of the lower high at $98.50 (short-term resistance) along with bearish divergences in MACD and RSI could be foreshadowing a break in the uptrend -- something that would be great news for EM/int'l equities and subsequently, global risk appetites... see page 7.

In today's report we highlight attractive Groups and stocks within Consumer Discretionary, Health Care, and Technology: CD-51 Retailers, Jewelry, HC-01 Pharmaceuticals, Mega-Cap, HC-04 Pharmaceuticals, Small-Cap, and TE-30 Wireless Components... see pages 15-27.
Underlyings
AbbVie Inc.

AbbVie is a research-based biopharmaceutical company. The company's products are focused on treating conditions such as chronic autoimmune diseases in rheumatology, gastroenterology and dermatology; oncology, including blood cancers; virology, including hepatitis C virus and human immunodeficiency virus; neurological disorders, such as Parkinson's disease; metabolic diseases, including thyroid disease and complications associated with cystic fibrosis; pain associated with endometriosis; as well as other serious health conditions. The company also has medicines in clinical development across immunology, oncology and neuroscience, with additional targeted investment in cystic fibrosis and women's health.

AC IMMUNE SA

Amarin Corporation Plc Sponsored ADR

Bayer AG ADS

Bristol-Myers Squibb Company

Bristol-Myers Squibb is engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of biopharmaceutical products. The company's products are sold worldwide, primarily to wholesalers, specialty distributors, retail pharmacies, hospitals, government entities and the medical profession. The company manufactures products in the United States and Puerto Rico and has manufacturing operations in two foreign countries. The company has products in the following therapeutic classes: hematology, oncology, cardiovascular and immunology. The company's pharmaceutical products include chemically-synthesized or small molecule drugs and products produced from biological processes, called biologics.

Comtech Telecommunications Corp.

Comtech Telecommunications is a provider of communications solutions for both commercial and government customers. The company's reportable operating segments include: Commercial Solutions, which provides satellite ground station technologies (such as modems and amplifiers) and public safety and location technologies (such as 911 call routing and mapping solutions); and Government Solutions, which provides technologies (such as tactical satellite-based networks and ongoing support for communication networks) and transmission technologies (such as troposcatter systems and solid-state amplifiers) to government end-users, international customers and domestic prime contractors.

GlaxoSmithKline PLC (ADR)

Heron Therapeutics Inc

Heron Therapeutics is a commercial-stage biotechnology company. The company is developing patient-focused solutions that apply its science and technologies to already approved pharmacological agents for patients suffering from cancer or pain. The company develops SUSTOL for the prevention of acute and delayed nausea and vomiting associated with initial and repeat courses of moderately emetogenic chemotherapy (MEC) or anthracycline and cyclophosphamide combination chemotherapy regimens. The company's second commercial product, CINVANTI, is indicated for the prevention of acute and delayed nausea and vomiting associated with of highly emetogenic cancer chemotherapy and nausea and vomiting associated with MEC.

Inseego Corp

Inseego designs and develops mobile, Internet of Things and cloud solutions for enterprise verticals, service providers and small and medium-sized businesses. The company's range of products includes 4G and 5G mobile hotspots, wireless gateways and routers for IoT applications, 4G LTE hotspots and USB modems, integrated telematics and mobile tracking hardware devices. The company's software-as-a-service (SaaS) delivery platforms include its Ctrack platforms, which provide fleet, vehicle, aviation, asset and other telematics applications and its Device Management Solutions, a hosted SaaS platform that helps organizations manage the selection, deployment and spend of their wireless assets.

Intercept Pharmaceuticals Inc.

Intercept Pharmaceuticals is a biopharmaceutical company focused on the development and commercialization of therapeutics to treat progressive non-viral liver diseases. The company's marketed product, Ocaliva? (obeticholic acid or OCA), is an farnesoid X receptor agonist approved in the U.S., the European Union and several other jurisdictions for the treatment of primary biliary cholangitis in combination with ursodeoxycholic acid (UDCA) in adults with an inadequate response to UDCA or as monotherapy in adults unable to tolerate UDCA. In addition to, the company is developing OCA for multiple indications, including nonalcoholic steatohepatitis.

Johnson & Johnson

Johnson & Johnson is a holding company engaged in the research and development, manufacture and sale of a range of products in the health care field. The company has three business segments: Consumer, which includes a range of products focused on personal healthcare used in the beauty, over-the-counter pharmaceutical, baby care, oral care, women's health and wound care markets; Pharmaceutical, which is focused on six therapeutic areas: immunology, infectious diseases, neuroscience, oncology, cardiovascular and metabolism and pulmonary hypertension; and Medical Devices, which includes products used in the orthopaedic, surgery, interventional solutions, and eye health fields.

Merck & Co. Inc.

Merck & Co. is a global health care company that delivers health solutions through its prescription medicines, vaccines, biologic therapies and animal health products. The company's segments are: Pharmaceutical, which includes human health pharmaceutical products that consist of therapeutic and preventive agents for the treatment of human disorders, and human health vaccine products that consist of preventive pediatric, adolescent and adult vaccines; and Animal Health, which discovers, develops, manufactures and markets veterinary pharmaceuticals, vaccines and health management solutions and services, as well as a suite of digitally connected identification, traceability and monitoring products.

Novo Nordisk A/S ADS

Osmotica Pharmaceuticals

PCTEL Inc

PC-Tel is a supplier of antennas and wireless network testing solutions. The company designs and manufactures antennas and it provides in-house wireless product development for its customers, including design, testing, radio integration, and manufacturing capabilities. The company also provides radio frequency test and measurement tools that improve the performance of wireless networks globally, with a focus on LTE, public safety, and 5G technologies. Mobile operators, neutral hosts, and network equipment manufacturers rely on the company's products to analyze, design, and optimize next generation wireless networks.

Signet Jewelers Limited

Skyworks Solutions Inc.

Skyworks Solutions is a provider of analog semiconductors that connect people, places, and things, spanning a number of applications within the aerospace, automotive, broadband, cellular infrastructure, connected home, industrial, medical, military, smartphone, tablet and wearable markets. The company's product portfolio consists of various solutions, including: amplifiers, antenna tuners, attenuators, circulators/isolators, wireless analog system on chip, direct current (DC)/DC converters, demodulators, detectors, diodes, directional couplers, diversity receive modules, filters, front-end modules, hybrid, light emitting diode drivers, low noise amplifiers, mixers, and modulators.

Spectrum Pharmaceuticals Inc.

Spectrum Pharmaceuticals is a biopharma company. The company's product portfolio consists of in-development drug products for the treatment of cancer patients. The company has three drugs in development: ROLONTIS, which is a long-acting granulocyte colony-stimulating for chemotherapy-induced neutropenia; Poziotinib, which is an irreversible tyrosine kinase inhibitor under investigation for non-small cell lung cancer tumors with various mutations; and Anti-CD20-IFNa, an antibody-interferon fusion molecule directed against CD20 that is in development for treating relapsed or refractory non-Hodgkin's lymphoma patients (including diffuse large B-cell lymphoma).

Tiffany & Co.

Tiffany & Co. is a holding company that operates through its principal subsidiary, Tiffany and Company. Through its subsidiaries, the company designs and manufactures products and operates TIFFANY & CO. retail stores worldwide, and also sells its products through Internet, catalog, business-to-business and wholesale distribution. The company's principal product category is jewelry. The company provides a selection of TIFFANY & CO. brand jewelry at a range of prices. The company also sells watches, home and accessories products and fragrances. The company has four reportable segments: (i) Americas, (ii) Asia-Pacific, (iii) Japan and (iv) Europe.

Provider
Vermilion Research
Vermilion Research

Vermilion Research delivers timely, actionable, and unique research inputs to professional investors. Our research strategists highlight securities which we believe are at major inflection points, based on our various proprietary technical indicators, and offer asymmetric risk/return profiles. We believe our research methodology, which is not limited by industry sector or market capitalization, enables us to deliver superior investment recommendations.

Our process begins by organizing all actively traded stocks into coherent sectors, then into logical industry groups. We then apply our proprietary relative strength tools to identify developing price trends. Once attractive trends are identified within a selected sectors or groups, we screen for individual stocks which we believe offer the best risk/reward profile. Vermilion offers U.S. and global equity market research products. Vermilion’s research team, which has received numerous awards and accolades, has a combined 70 year of experience in the analysis of investment securities.

Analysts
Dave Nicoski

Ross LaDuke

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